Covestro stock shows convincing performance at first listing anniversary

It was one year ago to the day, on October 6, 2015, that Covestro debuted on the stock exchange. For Covestro, formerly Bayer MaterialScience, it was the beginning of a new era as an independent company and a step that has enabled it to play to its strengths faster, more effectively and more flexibly in the global competitive environment.
The driver of Covestro’s success is its new vision: to make the world a brighter place. "This vision has spurred us all on. We want to use our innovative technologies and products to help meet the challenges of the 21st century – climate change, the diminishing availability of resources, and the expanding global population, for example – with products that benefit society and reduce pollution,” said CEO Patrick Thomas.
It is a commitment from which shareholders can also benefit: at €26, the first quoted price for Covestro stock a year ago was substantially higher than the issue price of €24. Since then, Covestro has performed well on the stock market: the current stock price of more than €50 is more than twice the issue price.
"The rise in the stock price reflects Covestro’s outstanding performance. Over the past 12 months, we have outperformed every index where we are represented and which is relevant to us. Every Covestro employee has good reason to be proud of this,” said Frank H Lutz, the company’s CFO and Labor Director.
Proceeds from the Covestro IPO, which amounted to around €1.5bn, were used primarily to repay debt to the Bayer Group to achieve an investment-grade rating. In June, Moody’s has confirmed Covestro’s Baa2 rating. Loans from Bayer have been repaid in full and Covestro is listed on both the STOXX Europe 600 and MDAX indices. Covestro further strengthened its already sound finances in spring 2016 with a bond issue for a total of €1.5bn, a move that gave the company even greater financial flexibility.
The company has already made use of that freedom, deciding in June to expand production capacity at its Brunsbüttel (Germany) site. Between now and 2018, a sum in the low hundreds of millions EUR will be invested there to double production capacity to 400,000t/yr of MDI, a raw material used in the manufacture of polyurethane.
At the same time, Covestro will continue to enhance its international presence. In response to rising demand, it opened a new large-scale facility in Shanghai in July, which will boost annual capacity by 50,000t of HDI, a raw material used in the manufacture of coatings and adhesives.
In addition, Covestro is deploying CO₂ on an industrial scale for the first time in the manufacture of plastics: it has invested around €15M at its Dormagen (Germany) site to produce an innovative foam component containing 20% CO₂, saving the corresponding amount of crude oil, the raw material traditionally used in the manufacturing process. Covestro sees considerable potential here to enhance sustainability.
More good news came from Covestro’s business operations, with the company raising its forecast for the current fiscal year as recently as July. "Covestro is posting excellent growth. Since the stock market flotation, we have performed very well, sold higher volumes and enhanced our profitability,” added Lutz. "From this strong position, we have paid our shareholders a dividend from the outset and plan to pay attractive dividends going forward.”
The company continues to see potential for improvement. "Despite everything we have achieved so far, we have not reached all our goals, particularly in our business processes and some of our internal structures,” explained Lutz. So there could be a few more chapters to come in the company’s success story: the global economy is forecast to grow by an average annual rate of 2.5% until 2020, while demand in the areas in which Covestro is active is expected to increase by an average of 4.0%/yr.